Solution to contract dilema

[J Grant]

Here is my proposed solution to the sales contract dilemma:

Withhold SC price and contract from appraiser for 1st phase of report development. Of course a list price is present, but no SC price is known.

Report goes to client. There is a second, reconsideration of value phase( already in place for purchase appraisals). In the reconsideration of value phase, the contract and price are made available to appraiser. Appraiser then would analyze contract and comment on relevance. If there is a gap between SC price and value opinion, appraiser could comment and can close gap to SC price if they wish, with verbiage as to why they think that is supported.

At the reconsideration of value, any sales provided by agent or other parties are forwarded ( as is done now, but this way it is all done together )

The two step process would also give cause for appraisers to charge more for purchase appraisals, which they would be able to, since these reports are often a time crunch, and involve extra steps of contract analysis, a reconsideration of value which now goes unpaid.

I am going out for day so can't reply to any comments till later.

 

[Lee Lansford]

Suggest: Write the ASB with your suggestion and ask that they consider it for the 2016-2017 USPAP.

 

[J Grant]

Okay good suggestion will revisit thread later

 

[Terrel L. Shields]

Is that supposed to somehow make your value less biased? Cannot see it working.

 

[J Grant]

The first appraisal is done with no sales contract or contract price known. That removes the bias.

 

[Terrel L. Shields]

Like you can't find the listing and have a good idea what the "target" is?

 

[J Grant]

The listing would provide a target range but not exact target.

 

[NC Old Guy]

Why not just a range of value (reasonable of course)? If contract within the range, lender can do what they want. If not within range, probably over sold anyway and just move on. Problem would be to define "reasonable range". Knowing some appraisers, I can see where they would have a range, like, Gee, "it must be within $100-$200k" (assuming it was listed for $150k). Years ago. Had a lender that wouldn't share sales price because that is what the borrower wanted. Told them I was perfectly happy with that. The number would be what it would be. I wouldn't change it later, no matter how large, or how small, the difference. They agreed. We moved forward. Have no idea, even today, what the contract price was. It closed at the appraised value.

 

[Pilgrum]

If you have a bias because of the contract you should really consider your ability to do the job.
I am sure most of you, if you have been working your area(s) for awhile, will have some bias without the contract
As far as the listing price is concerned that argument goes out the window the moment you decide what the comparables (substitutions) and market area are and do your first search. You are immediately faced with a range of value and need only to render the appropriate adjustments for differences and condition to refine your opinion of value.
I know. I know. An over simplification. .
The sales contract is the LAST thing that needs to be analyzed. If it needs analysis at all.

 

[J Grant]

NC, I wouldn't mind if the point value was replaced by a reasonable range, but that's not what we are working with now. And, as you said, the whole premise hinges on a range that is "reasonable" or credible, and that means using the best comps, not cherry picking, finding and using the best market derived adjustments and so on.

Which brings us back, full circle, to competent, experienced, unbiased. I believe my suggested way of a phased introduction of contract price would provide a better indication of which appraisers are competent and unbiased, as well as showing which contract prices are indicators of market value, and which are not.

A nationwide experiment, where 2 appraisals are done on each purchase , with one appraiser provided the SC price and the other not, might also yield some pretty interesting results when the 2 reports were compared!